0DTE (Zero Days to Expiration) options trading has exploded in popularity, offering fast-paced action and the potential for significant profits—but it’s not without risks. In this interview, seasoned trader Tammy Chambless shares her strategies, tips, and lessons learned from years of trading 0DTE options.

Watch the video: “0DTE options trading for beginners”

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What is 0DTE options trading?

0DTE stands for “Zero Days to Expiration,” meaning these options expire on the same day they are traded. Unlike traditional options with 30, 60, or 90 days to expiration, 0DTE options require constant attention and quick decision-making.

Tammy explains that while the fast-paced nature of 0DTE trading can be thrilling, it also demands discipline and a solid understanding of risk management.

Key characteristics of 0DTE options

0DTE options trading happens over only a few hours. That gives some specific characteristics compared to longer-term options trading:

• Rapid decay: Theta (time decay) accelerates as expiration approaches, especially in the final hour of trading.
• Gamma risk: Gamma, which measures the rate of change in an option’s delta, can cause dramatic price swings near expiration.
• No overnight risk: Unlike longer-term options, 0DTE trades don’t carry overnight risk, which Tammy sees as a major advantage.

0DTE strategies for beginners

Tammy discusses several strategies that traders can use for 0DTE options:

Credit spreads: Selling put or call credit spreads is a beginner-friendly strategy that limits risk while offering consistent returns.

Iron condors: Tammy’s personal favorite, this strategy involves selling both a call spread and a put spread, profiting as long as the underlying asset stays within a specific range.

Directional trades: Buying calls or puts can be profitable for traders with a strong market outlook, but Tammy warns that this approach requires precise timing.

Tammy trades primarily Multiple-Entry Iron Condors. However, she recommends that beginners start with a simpler strategy, such as credit spreads.

How to manage risk in 0DTE trading

0DTE trading is risky, and without proper risk management, you can blow up your account fast. Tammy emphasizes these key risk management techniques:

Always use stop losses

• Never try to exit manually—the market can move faster than you can react.
• Use a stop loss set at 1x or 2x the premium collected to limit potential losses.

Position sizing: Keep risk per trade low

• Beginners should risk no more than 2% of their account per day.
• If your account is smaller than $10,000, you may risk up to 5% per day, but no more.

Avoid illiquid options

• Trade only highly liquid products like SPX, XSP, or RUT to ensure smooth trade execution.
• Options with wide bid-ask spreads can be difficult to exit, leading to higher losses.

Be aware of end-of-day volatility

• Many traders get caught by sudden market moves in the last 15-30 minutes of trading.
• Tammy recommends exiting most trades at least 15 minutes before the market closes to avoid unwanted surprises.

Common mistakes beginners make

Tammy highlights several pitfalls to avoid:

• Trading too big: Beginners often increase their position size too quickly after a few successful trades, leading to significant losses.
• Ignoring stops: Trying to manually exit trades instead of using stop-loss orders can result in catastrophic losses.
• Overlooking fees: High trading fees can eat into profits, especially when making multiple trades per day.

Tammy’s favorite underlyings

Tammy prefers trading cash-settled index options like SPX and XSP because they eliminate the risk of after-hours price movements. She also stresses the importance of liquidity, noting that SPX is one of the most liquid options markets, making it easier to enter and exit trades without significant slippage.

Where to learn more

Tammy recommends two Facebook groups where she is active herself:

• Quantum Options – mostly focused on 0DTE trading. Quantum options also has a Discord channel, and you can receive an invite by mailing Tammy at tamchambless(at)gmail.com
• TastyTrade Options – covers a wider range of strategies